For decades, when people talked about disruption, the first thing that came to mind was the impact innovative information and communication technologies have on individuals, organizations and the society. However, late in 2019, the world was hit with a perfect storm in the form of a disruptive pandemic that affected people and economies and spread without discrimination throughout the developed world and the emerging economies. It was an invisible stealth attack; we know it as Covid-19. The pandemic, frequently referred to as the Coronavirus, has caused a worldwide shock that affected people’s lives and livelihoods, led to a slowdown in economies, disrupted financial markets, disturbed value chains, and caused wild swings in demand. The resulting precautionary health and safety measures including physical distancing and the economic implications such as laying off people are pushing millions around the world either to work remotely or be out of work.
The pandemic showed the importance for a globally coordinated response as well as a collective understanding of health and safety standards or else the journey to overcome the crisis will be longer and more difficult. Accordingly, governments around the world have coordinated travel rules, shared information about public health, and exchanged medical expertise but there is a need for much more. From an economic perspective, falling oil prices, slowing manufacturing, tumbling stock market indices and severe hits to businesses forced governments to pass comprehensive and unprecedented fiscal and monetary policy responses aiming at stimulating their economies and preventing mass layoffs and business shutdowns, especially for small and medium-size enterprises.
The nature of the global response to the pandemic made the metaphor of wartime economics more relevant, because there is no peacetime precedent for the asymmetric mix of mobilization and demobilization of people and resources that we are seeing today. The speed and magnitude of the impact demonstrated that the world is fragile, became disrupted and, in many ways, dysfunctional in no time. Accordingly, the strengths, weaknesses, agility, resilience and creative capacities of different countries are all being put to the test, and the current crisis is showing that in the age of disruption, the world is in dire need for leaders who are visionary, innovative and pragmatic for societies to be able to navigate through these uncertain times when everything is increasingly becoming fast-paced, unpredictable, and dubious.
The recent developments demonstrated that globalization – one of the world’s most powerful drivers which led to a significant increase from around 40% of the world GDP in the 1980s to more than 60% as we start the third decade of the 21st century – has shown like anything else that it has its own limitations. The global economy was already unpredictable at the start of 2020. Nevertheless, even with the magnitude of the impact of the pandemic and its repercussions, Covid-19 will not end globalization; having said that, most probably we have already seen the peak of it. Moving forward, we will witness a deglobalization trend not intended to focus on independent and sovereign supplies but aiming for better planning and management, more resilience and self-reliance, as well as localization including transitioning partially to distributed manufacturing models and increasing the diversification aspect in global value chains.
This will go way beyond trading and doing business given that societies around the world were really concerned to find that their health and safety depended on a global struggle to import ventilators and other healthcare devices including personal protective equipment. Consequently, there is a growing sentiment that it would be more rational and practical to be less dependent on sourcing things internationally. Global value chains are complex however there is a need to build a better, more organized and stronger international cooperation network. In a nutshell, the reconfiguration of global value chains is unavoidable. In addition, the previous focus of businesses and industries on reducing their buffers to maximize efficiency, minimize costs, reduce inventories and drive-up asset utilization as the fundamentals of the organizational model will have to be revisited. In the future, there might be a shift from almost zero inventory and a just-in-time approach to a just-in-case mode of operation. However, efficiency will remain the ultimate objective coupled with sourcing from the best possible locations for better quality, optimum cost and timely distribution.
It is worth noting though that ironically the world has become less and at the same time more globalized over the past few months. It has become less globalized when it comes to trading and doing business across borders, yet it has become more globalized when it comes to human interactions given the significant increase in the use of information and communication technologies despite the time and distance barriers; and because of the ongoing coordination between medical doctors and other healthcare professionals from around the world to exchange information and experiences in order to combat the pandemic.
It is difficult to predict how the world will look post Covid-19, but it will be different. In the meantime, what should be our thought process? How can we prepare for the future? How can we do things better? Can embracing innovative technologies such as artificial intelligence, big data, Internet of Things, blockchain, 3D printing, robotics, and drones represent real game changers to the global society? The pandemic has surely created a strong incentive and an appetite for more digitization and many of these technologies have moved from being an option to becoming a necessity and many people started using them. However, the element of trust between people and technology remains marred with mixed feelings. While some people know that technology underpins their lives, others feel that it represents a massive breach of privacy and a threat to their health.
Whether the current crisis is short-term or will be around for the long haul, and I sincerely hope that the latter will not be the case, the crisis will push societies, governments, enterprises and individuals to think more creatively. The disruptions impacting different societies are not just political, economic, and social; they are also affecting the way people live, work, study, travel, communicate, stay healthy, and get entertained. However, usually at a time of crisis, disruption brings advancement in the same manner that challenges bring opportunities. Accordingly, given the recent developments and in the context of emerging economies, there is a growing enthusiasm for digital transformation which represents an opening for NextGen innovative entrepreneurs focused on tech-based and tech-enabled startups that address priority issues and sectors such as transportation, FinTech, healthcare, logistics, education, retailing, and agriculture. For example, at a time when banks are relatively classical in their mode of operation and are offering more fin than tech solutions, FinTechs are offering more tech than fin possibilities. Consequently, FinTechs through unconventional and innovative financial technology platforms offer a unique opportunity for financial inclusion and the integration of the informal sector into the formal economy.
People always talk about change, promote change, push for change but they never want to change. This time, the crisis forced them to change and, in a way, adapt and this might result in multiple transformations in attitude, behaviour and habits. On this note, organizationally, there needs to be a shift in mindset in terms of good management practices while focusing more on environmental, social and corporate governance as well as on investing in sustainability, promoting and investing in innovation, creating green jobs, retaining and augmenting the skills and capacities of human capital as well as mitigating risks. It is all about reimagining the markets of the future and upscaling the investments in healthier, safer and more inclusive working environments and with the advances in biological science and the merger of infotech and biotech, there are no boundaries to the prospects lying ahead in the transformation of societies, economies and businesses including tackling global challenges from climate change to pandemics.
As humanity attempts to control the impact of Covid-19, it is important to learn from the lessons of the past and understand that the policies and decisions made today will not just help societies overcome this crisis but also have profound implications on what happens in the future across different economies worldwide. So, what the future holds will depend on many aspects including how fast and affordable a vaccine will be made available for everyone so together as citizens of the global society, we can start venturing into the new norm. Until then, I choose to remain not just hopeful but cautiously optimistic.
About the author: Sherif Kamel is professor of management, dean of the school of business at The American University in Cairo and president of the American Chamber of Commerce in Egypt.
30 May 2020